Negotiation: Concept and Effectiveness

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Table of Contents

Introduction
Distributive Negotiation
Effectiveness of Distributive Negotiation Strategy
Conclusion
References

Introduction

Recent economic recession has led to an increased number of strikes. This evidently raises the importance of “good industrial relations”, especially during slump (Samuel 41). In negotiating situations, the interests of the employer and employees are at stake and not necessarily, both will overlap. A degree of disagreement and discontent are expected out of a negotiation outcome. None of the parties wants a deadlock in bargaining process; therefore, the best option is to review the options and issues, which are common to both the parties. For this, it is important to have knowledge of the resources available for distribution and the best possible way it can be distributed in. However, the nature of the value maximization would depend on the type of negotiation strategy adopted.

Negotiation, which has obtained primal importance in order garner competitive strategy for an organization, it is important to understand what, is understood by the term. Negotiation may be defined as the “means by which people deal with their differences.” (Harvard Business School Press xi) In businesses, negotiation is a “formal affair” in which two parties talk over prices, performance, or partnership terms and contracts (Harvard Business School Press xi). One of the primary issues that have been negotiated with the unions is compensation or wages. Thus, the negotiator has a fixed pie available for distribution and his aim may be to optimize one side’s share or optimize mutual benefit. A discussion on different types of strategies for negotiation must be discussed in order to understand the way it takes place.

Negotiation strategies are said to be of two primary types of negotiation – distributive and integrative (Harvard Business School Press 2). This distributive theory, which is discussed in the paper, was based on the first aim of the negotiator i.e. to maximize one side’s profit. Distributive negotiation practice was traditionally used as a strategy for negation and the underlying assumption of the strategy was that only one party could get the maximum benefit out of the process. In this paper, the advantages and disadvantages of the strategy are discussed. The paper also discusses the effectiveness or ineffectiveness of the strategy in various business situations.

Distributive Negotiation

Distributive negotiation or bargaining is defined as a “zero-sum approach to collective bargaining, in which gains for one side are made at the expense of the other” (Dictionary of Human Resource Management 88). In other words, distributive negotiation takes place between two parties who are at competition to gain control over a fixed amount of value (Harvard Business School Press 2). In this case, one side gains from the negotiating process at the cost of the other side. Therefore, the key question that arises from the distributive negotiation process is that who will get the largest share of the pie? Therefore there are few characteristics of the distributive negotiation strategy is derived from the definition:

The negotiation is usually bilateral in nature i.e. between two parties.
It is a process of zero-sum or constant-sum game, wherein only one party can be a winner. Therefore, the negotiating strategy enforces a win-lose situation.
It deals with one problem, the solution to which is derived through this negotiating strategy.

For example, wage negotiation between the labour union and the employer is a classic example for distributive negotiation. The employer is aware that the employer the excess remains a loss for the union will pay any amount that is decided upon on the negotiation table. Therefore, the aim of the negotiation, from the employer’s side would be to try to keep the wages as low as possible to minimize the expected wage cost. Distributive negotiation in a pure sense is negotiation over a fixed amount of value or good. A classic instance is two individuals negotiating over a freshly baked apple pie. In this case, the goal of every party is to maximize the amount of pie she gets from the bargain.

Information or knowledge of the other party is key to winning this type of negotiation process (Harvard Business School Press 4). Lesser the information the other side has access to; greater is one’s chance of winning the negotiation. Further, the more information one side has, greater is the side’s bargaining power over the other side. A unique example of information availability in case of distributive negotiation is presented below:

“Consider what happened when undefeated world chess champion Gary Kasparov faced off against an IBM supercomputer dubbed Deep Blue in a series of matches in 1997. Kasparov typically prepared for a match by studying his opponent’s earlier matches move by move. But IBM refused to give Kasparov information about Deep Blue’s previous games, so he entered the match knowing little about Deep Blue’s strengths and weaknesses as a chess strategist. During the match, Kasparov encountered few problems until well into the second game, when Deep Blue made an unusual move that Kasparov was convinced only a human would make. Surprised and confused, Kasparov lost his focus.” (Galinsky, Maddux and Ku 3).

Therefore, the important issue in winning a negotiation is concealment of maximum amount of information possible in order to keep the other side in doubt. The first strategy to win distributive negotiations is to give out minimum amount of information about one’s side.

Distributive negotiation is essentially an economic form of bargaining process based on such criterions as the cost of a strike or the benefit of the present offer, etc. (Peterson and Tracy 41). From the point of view of the “commitment” tactics, Peterson and Tracy describe the process in order to show “how each team tries to establish a firm commitment to a position that is within the other team’s range of acceptable solutions but is near the end of the range favourable to itself.” (41) In such a situation, the primary objective is to ascertain one’s position before the other party does. Therefore, in case of distributive negotiation, the position of the parties must be stated very clearly and the value at stake must be clearly mentioned, as the other party usually would try to misinterpret it. Thus, it is suggested by Peterson and Tracy that if the negotiator feels that his side has an upper hand in the negotiation, there would be greater chance of success (42). Therefore, in order gain success in distributive negotiation, psychological factor plays a main role as the negotiator sets the “bargaining range” (Harvard Business School Press 4).

Information gathered about the other side may be of use. This is because this will provide a greater edge over the other side in order to set the table for negotiation. Exploitation of the information available about the other side will help the negotiator gain greater control of the bargaining process. The main type of information, which may be of use to the negotiator, is “why the other side want to deal, their real interests and business constraints, and their preferences among the issues or options.” (Harvard Business School Press 4).

Effectiveness of Distributive Negotiation Strategy

By virtue of being a win-lose situation, distributive negotiation is more competitive in nature and therefore aims at optimization of one party’s goals. As these goals are in direct contradiction with the goals of the other party, there are more chances of escalation of conflict. Therefore, due to lack of integration or cooperation between the negotiating parties may lead to disruption in the negotiation.

Most of the negotiations are win-lose or constant-sum or distributive in nature (Sebenius 29). In other words, most negotiations at some point of time are result in more value claimed by one side comes at the expense of the other side. Sebenius states that “… in choosing a strategy for the highly restrictive class of negotiations involving “first and final offers.” one must balance the value to be claimed against the chance and cost of impasse.” (29) Though value out of the negotiation can be gained just by reaching an accord, however, in most cases, a strict distributive negotiation may lead to dramatic conflict over the issue. In cases where possible value can be created over an agreement is foregone due to the impasse. Therefore, in this one of the greatest setbacks of distributive negotiation is the creation of a deadlock, which makes bargaining impossible and therefore turns the win-lose situation to lose-lose situation.

Distributive strategy of negotiation is an effective means of handling disputes between labour and management: “Distributive tactics, on the other hand, generate labour-management conflicts, promote individual winning through the use of offensive and defensive manoeuvres.” (Goering 384) In this case, defensive moves in distributive strategy are those tactics, which are adopted in order to build a protective cocoon around the negotiator’s position. An offensive move is one wherein the negotiator tries to point the finger at the other side’s position (Goering 384). Therefore, the effectiveness of the distributive strategy is also related to the establishment the nature of the conflict, i.e. if it will be competitive or cooperative. Thus, it can be stated that if the “social process” of negotiation is cooperative or not will establishment the effectiveness of the negotiation (Goering 385). As distributive strategies are mostly related to win-lose situation, this strategy is effective when used in a situation of conflict: “…constructive conflict can be identified with cooperative (integrative) interaction, while destructive conflict is typically associated with competitive (distributive) interaction.” (Goering 385) Therefore, mostly research has suggested that distributive tactics of negotiation leads to negative outcome. Thus, the correlation between using distributive strategy and the outcome of the tactics suggests that they have a negative relation.

There is a relation between the negotiation strategy and the process of negotiation. Research has suggested, “… bargaining interaction tends to be characterized by reciprocal exchange” (Goering 385). This implies that in case of distributive communication to the other party will lead to distributive responses. Thus, the communication process selected by the negotiator has an impact on the process of the negotiation as well as on its outcome.

Distributive strategy, as stated earlier, can be of two types – defensive and offensive. Offensive strategies are those that attack the other party’s position while the former is one wherein the other defends the defender’s bargaining position. In case of offensive strategy a few of the tactics that are employed by the negotiator are “initiations, rejections, threats, attacking arguments, requests for information, provides reaction, clarification, and negative affect” while the strategies that are taken in case of defensive strategy are “accommodations, retractions, commitments, promises, demands, self-supporting arguments, and provides information” (Goering 390).

The other question that arises is what the individualistic personality trait that effects distributive negotiations is. Researchers believe that different individual personality traits can result in effective negotiation outcome (Barry and Friedman 345). Barry and Friedman tested the effect of the influence of the personality type of the negotiator according to the Big Five personality trait on the effectiveness of distributive negotiation. They used the effects of the influence of extraversion and agreeableness on the distributive negotiation (346). Extraversion implies an individual’s belligerence, confidence, and sociability and agreeableness implies timidity or tenderness in an individual. The research outcome showed that as hypothesized, both these personality traits were “liabilities” on the negotiator practicing distributive negotiation (351). On the other hand, cognitive ability, meaning an individual’s ability to process complex information and conscientiousness in the personality trait of the negotiator was found to have positive effect on distributive negotiation process (352). It is suggested that the success of the distributive negotiation will depend on the presence of these personality character in case of real life negotiations:

“Our results are likely to be most valid for real-world bargaining situations that require relatively little analysis and are primarily a matter of nerve and tactics (e.g., a used-car purchase) or, in a more complex situation, for the phase of bargaining that occurs after any required analysis.” (Barry and Friedman 354)

Conclusion

Distributive negotiation strategy is a zero-sum game tactics, which leads to a win-lose kind of situation. The study shows that this kind of strategy usually leads to negative outcome as there are impediments in agreement when both the parties aim at aiming their personal goal that are direct conflict with one another. Further, individual personality traits like those that agreeableness and extraversion are found to have a negative effect and conscientiousness and cognitive ability is supposed to have positive effect on distributive negotiation. Apart from this, the distributive negotiation is widely used in case of labour-management disputes. Research has also found that the success of the negation through distributive tactics will be successful only when the following are followed: “(a) he feels that his own side’s bargaining power is strong; (b) he estimates that a work stoppage is unlikely or lower in cost to his own side than to the other; (c) his own team makes an early commitment to its position, while the other team does not; and (d) his own team is clear and specific in stating its position, while the other team is less so.” (Peterson and Tracy 42) Apart from this availability of information for the parties plays an important role in the outcome of the negotiation. Therefore, it can be implied that in instances where low trust pervades between the negotiating parties, distributive negotiation will be a good strategy. However, the negative effect of the distributive bargaining tactic is that they do not allow the evolution of a win-win situation wherein a positive-sum bargaining can take place. In such a situation, the parties involved will both gain from the negotiation process. Distributive bargaining process does not provide scope for a mutually beneficial negotiation outcome, and therefore face a lot of criticism from the advocates of integrative negotiation process.

References

Barry, Bruce and Raymond A. Friedman. “Bargainers Characteristics in Distributive and Integrative Negotiation.” Journal of Personality and Social Psychology, Vol. 74, No. 2 (1998): 345-359.

Dictionary of Human Resource Management. “Distributive Bargaining.” Dictionary of Human Resource Management (2001): 88-89.

Galinsky, Adam D., William W. Maddux and Gillian Ku. “Consider what happened when undefeated world chess.” Negotiation (2006): 3-5.

Goering, Elizabeth M. “Integration Versus Distribution in Contract Negotiations: An interaction Analysis of Strategy Use.” The Journal of Business Communication, Vol. 34, No. 4 (1997): 383-400.

Harvard Business School Press. The essentials of negotiation. Boston, MA: Harvard Business School Press, 2005.

Peterson, Richard B. and Lane Tracy. “Testing a Behavioral Theory Model of Labor Negotiations.” Industrial Relations, Vol. 6, No. 1 (1977): 35-50.

Samuel, Peter. “… negotiate with trade unions.” People Management 2009: 41.

Sebenius, James K. “Negotiation Analysis: A Characterization And Review.” Management Science, Vol. 38, No. 1 (1992): 18-38.

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